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PEIA plans to cut $50 million, director says

By PHIL KABLER

Charleston Gazette-Mail

CHARLESTON, W.Va. — Public Employee Insurance Agency executive director Ted Cheatham told legislators Wednesday that the PEIA Finance Board had no choice but to impose about $50 million in benefits cuts for the 2017-18 plan year, since no additional funding for premiums was expected.

In December, the board approved the cuts, primarily imposing higher deductibles and out-of-pocket maximums for insurees, after then-Gov. Earl Ray Tomblin notified the board there would be no increase in state funding for employer premiums.

The 2017-18 budget bill that Gov. Jim Justice submitted on Feb. 8 also does not provide additional funding for premiums.

“At this point, no one has suggested to me that we are getting any [additional funding] at all,” Cheatham told the House Finance Committee.

With a plan that provides nearly $1 billion a year in benefits to public school and state employees and retirees, as well as many county and municipal employees, rising health care costs requires that PEIA must either receive significant additional funding each year, or make more benefits cuts annually, he said.

“It’s medical inflation and pharmaceutical inflation. That’s the two drivers of cost,” Cheatham said.

He said projections are that PEIA will need an additional $50 million in 2018-19, $55 million to $60 million in 2019-20, and close to $70 million for 2020-21.

Last year, after an extended struggle to pass the current 2016-17 state budget, legislators provided an additional $34.5 million for PEIA employer premiums, which avoided “draconian” benefits cuts, but also required a $14 million increase in employee premiums under a state law requiring an 80-20 match on premiums.

Cheatham noted that the PEIA Finance Board has no authority to raise or lower premiums, and is dependent on funding levels set by the state.

“The Legislature and the [state] Budget Office determines the premium levels for active employees under PEIA,” he said.

Cheatham made the comments during the Department of Administration’s budget hearing before the House Finance Committee.

New Administration Secretary John Myers told the committee, “I view us as the customer service arm of state government.”

In additional to health insurance, Administration agencies operate pension plans for public employees, provide casualty insurance coverage for state agencies, maintain state buildings and oversee the state vehicle fleet, among other functions.

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